Boule Diagnostics reported weaker-than-expected Q2 results, mainly due to lower sales and gross margin. Sales were 6% below (SEK 137.0m vs ABGSCe SEK 146.4m) with a gross margin of 43.1% (ABGSCe 45.5%), resulting in a 25% miss on adj. EBIT. The main reason for the deviation on sales was fewer instruments sold (883 vs ABGSCe 1,250) at the same time as the ASP was higher than we expected (SEK 41.3k vs ABGSCe 36.0k). Looking at the different geographies, Asia compared negatively (-42% vs ABGSCe), and Western Europe and Africa/Middle East positively (+131% and +40% vs ABGSCe, respectively). Cash flow from operating activities improved y-o-y, but the capitalisation of R&D (to support the development of the 5-part system) continues to hold back FCF. As of 30 June the company had SEK 34.7m in cash and an additional SEK 47.7m in credit facilities available.
Focus areas going forward
As part of the Q2 report, the new CEO launched three new focus areas: (1) improve margins through cost control, (2) accelerate organic growth, and (3) build a growth-oriented portfolio. Already in this quarter, the headcount was down by eight, generating annual expected cost savings of SEK 8m. Management says that further efforts to decrease costs cannot be ruled out. Regarding estimates, we cut our adj. EBIT for '24e by 6.7% and '25e-'26e by 2.9-3.2% following the Q2 results. Reported '24e EBIT is down more due to restructuring costs taken in Q2.
NTM EV/EBIT at 8.2x, 41% below its historical average
At 8.2x NTM EV/EBIT, Boule Diagnostic is trading 41% below its historical average, and 46% below its historical average with regard to its NTM P/E. Over the coming years, we forecast a pickup in organic sales growth and improved margins, but we are still below management's long-term targets of >10% sales growth and >15% EBIT margin.
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